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What is the difference between freehold and leasehold?

Simply put, freehold vs leasehold is the difference between owning your home and living in a home owned by your landlord.

This may not be something your estate agent talks about prominently when you go to buy a home, but understanding the pros and cons of freehold vs leasehold is important if you want to make sure you're choosing the best investment for your hard-earned money.

What is freehold property?

A freehold property is owned outright by the freeholder, with no expiry on ownership. This also includes any land around the property.
Most properties you can purchase are freehold, except for leaseholds that usually belong under schemes for shared ownership. If you’re the freeholder, it’s your duty to maintain the property.

Why buy freehold?

There are several benefits you can reap from investing as a freeholder:

You don’t need to deal with a freeholder (landlord)… because, well – that’s you!

No need for ground rent or service charges

You don’t need to be concerned about the lease running out, as you own the property outright

No leaseholder restrictions, such as ‘no pets’ or needing permission to decorate

You won’t have a bad landlord refusing to maintain the property

What is leasehold property?

A leasehold property is owned by the freeholder – or landlord. You can lease a property for a period of time, usually long-term, such as 90 – 999 years. There is also the option for a shorter lease, for perhaps 40 years. It all depends on your agreement with the leaseholder.

While leasehold used to be more common for flats and apartments, there are now more leasehold houses for sale. New developments tend to feature leasehold properties that have been sold through the developer.

Why leasehold?

There are many benefits of investing in leasehold property:

Leasehold property tends to be less expensive than freehold

If the legal contract between leaseholder and freeholder states the freeholder must maintain the exterior of the property, this means the leaseholder has less responsibility

You will still have the opportunity to buy the property from the freeholder, or at least buy a share of the freehold

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